Trump’s Economic Plan

Yesterday, we covered the economic policy proposal from Vice President and Democrat nominee Kamala Harris. Today, we run it back for round two with Republican nominee Donald Trump and his game plan for the economy.

Author

Vyomesh Kumar
August 22, 2024

Silver banana goes to…

In this issue of the peel:

  • Yesterday, we covered the economic policy proposal from Vice President and Democrat nominee Kamala Harris. Today, we run it back for round two with Republican nominee Donald Trump and his game plan for the economy. 

  • Retailers are poppin’ off as Target and TJX both crush their latest quarterly earnings and give upbeat guidance. But, not all retailers are created equally. Macy’s learned the hard way they should’ve been bought out, and a huge, early investor exited their holdings of JD.com… and it’s not Warren Buffett.

  • The entirety of the BLS needs to be fired. Turns out there was a major miscount on total U.S. payroll additions… and it only made the situation worse. Find out what’s going on and what it means for rates below.

Market Snapshot

Banana Bits

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It’s a quick-read companion for high-speed, high-quality negotiations that will help you stand out. 

Macro Monkey Says

Trump-onomics

Shoutout to you, apes, for not freaking out at me yesterday. 

Or, I should say shoutout to most of you…

Please continue the lack of freaking out today as we follow up on yesterday’s piece about VP Kamala Harris’ economic proposals with the same thing focused on that of her arch-enemy.

Luckily, this one’s a little easier as former President Trump has, well, been President before. Let’s get into it.

What Happened?

(P.S.—keep this chart in mind as we lay it out)

22 minutes before the time of writing, the (allegedly) non-partisan Tax Foundation published this clutch-*ss tool comparing economic proposals from Harris, Trump, RFK, and the current administration.

Even before, on Monday, the Trump campaign announced plans to formally announce their own economic policies in the coming days. 

But he’s already unveiled much of what’s sure to be included. While Harris centralized these proposals in a speech last Friday, Trump has done so in a more decentralized way but also outlined a broad gameplan in a speech last Thursday.

Plus, we already have 4yrs of experience under this guy, so we know what it’s like to live in Trump’s economy.

Diverging from VP Harris, a “huge” focus of Trump’s proposals center around domestic energy production.

Not sure why our thermal units are British—maybe they’re just sticking around for the tea—but Trump’s energy policy is, in his own words, to “drill, baby, drill.”

A priority of the Trump campaign is “energy independence,” which is a lot different than “energy security.” Independence means we only use what we produce in the U.S., but security just means we have the capability to do so, essentially.

The U.S. is undoubtedly energy secure. We’re the largest producer in the world, and 2023 set a new record for oil and gas production, racking up 12.9mn barrels of oil per day. Russia comes in second at 9mn barrels/day.

But, there’s an argument to be made that more energy production is always better, as this leads to cheaper prices for econ consumers. According to the World Bank, cheap energy is one of the best, if not the best, ways to reduce poverty.

However, Trump did outline plans for similar economic issues that Harris touched on, including taxes, deficits, and the labor market.

Some of these key proposals included:

  • Reducing the corporate tax rate from 21% to 20%.

  • Adding a tax on large private university endowments.

  • Imposing a universal baseline tariff of 10-20% on all goods and 60% on all goods from China; commented that we may be able to replace income tax with tariffs.

  • Running a mass deportation of illegal/undocumented immigrants.

  • Not sure if this was serious, but bro said he’d pay off the national debt…?

Most economists (correctly) argued that paying off $35tn in debt in 4 years is as probable as winning the lottery twice in a row. But hey, if you reach for the stars, maybe you won’t fall through the clouds.

The Takeaway?

Yesterday, we chose the word “aggressive” to define Harris’ economic proposals. While that certainly applies to Trump’s plans, a better word for his is “pugnacious.”

And I’m not just showing off my exquisite vocab. Trump’s plans are aggressive not in terms of spending but in cutting and changes from the current administration. 

Plus, Trump’s proposals included more focus/detail on responses to foreign and global economic policies, potentially definable as more “reactive” at times.

Because Trump’s proposals have been less formally presented, we don’t have estimates on short and long-term impacts like we did with Harris yesterday. If we do find reliable estimates, we’ll be sure to update them.

Again, it’s just the campaign trail. This is the time to f*ck around. Just like with Harris yesterday, It’ll be months before anybody’s forced to find out.

What's Ripe

Target (TGT) 11.20%

  • Huge news as we’ve discovered the cause of the hipster recession hitting Starbucks, Pinterest, and others. Everyone is going on Target runs instead.

  • The retailer crushed Q2 earnings on 3% higher foot traffic and an 8.7% jump in online traffic YoY. Total sales grew 2%, while earnings per share were up 40%.

  • That was enough to beat estimates easily. But, the green shoots identified by management lifted the whole retail sector as hope returns for U.S. consumers.

TJX Companies (TJX) 6.11%

  • In 2024, there are few things U.S. consumers love more than a discount retailer. Although TJ Maxx is still way too expensive for me, apparently, they’re killing it.

  • The owners of TJ Maxx, HomeGoods and Marshalls, reported EPS of $0.96/sh on $13.47bn in revenue vs estimates for $0.92/sh on $13.31bn.

  • Sales grew 5.6% annually, giving TJX enough confidence to jack up guidance. The company also announced it has taken a 35% stake in Dubai-based retailer Brands For Less.

What's Rotten

Macy’s (M) 12.91%

  • After refusing buyout offers, Macy’s bet on themselves is going about as well as my UFC bets—losing a lot of money because I don’t know what’s going on.

  • The department store beat on earnings in Q2, but the good news ended there. Sales of $4.94bn missed the $5.12bn estimate, and guidance was even worse.

  • Selective shoppers, more discounts, and 150 store closures contributed to revenue guidance coming in ~$350mn short of consensus.

JD.com (JD) 4.15%

  • Breaking up can be hard unless it nets you billions of dollars. Just ask MacKenzie Scott, Melinda French Gates, or Walmart after selling their stake in JD.com.

  • The world’s largest retailer first invested in the Chinese e-commerce site 8 years ago to get exposure in the country after its Walmart-branded attempt failed.

  • Now, Walmart has exited the investment, netting ~$3.6bn. That might sound great, but shares are down 75% since 2021. Maybe this was a case where timing the market actually was more important than time in the market.

Thought Banana

Learning To Count

I’ll be the first to admit that counting is hard.

While it was great when I finally learned how to earlier this year, I think the team over at the U.S. Bureau of Labor Statistics (BLS) could use a few lessons.

I’m happy to oblige. But first, let’s dive in.

What Happened?

Yesterday, the BLS released their preliminary revisions on total U.S. job growth for the 12 months leading up to March 2024.

The biggest takeaway was that the BLS has no idea what numbers are. 

But, the other big takeaway that everyone with a WSJ subscription and a Twitter account is tweaking about was the downward revision of 818k jobs.

In other words, the U.S. labor market added 818k fewer jobs than previously thought from March 2023 to this past March. This was the largest downward revision since the GFC.

That means the U.S. economy has added ~30% fewer jobs than we thought. 

Those 818k people could have gotten jobs or exited the labor force since then, but if that amount remains unemployed, then by my calculations, the unemployment rate is closer to 4.79% than the 4.3% reported in July (all else equal, which it probably isn’t).

Source

Most of the revisions were found in Professional & Business Services, Leisure and Hospitality, and, most concerning, Manufacturing. Don’t worry though—at least government roles (a.k.a. your employees) grew by 1k.

The Takeaway?

As far back as March 28th, the Philly Fed was already all over this. 

This might be a surprise to us plebs, but our economic overlords seem to have mostly been aware of this, as indicated in speeches and press releases. 

For example, back in June, Powell said, “There’s an argument that (job growth numbers) may be a bit overstated…”

But this certainly does make the Fed, as well as the BLS, look even more incompetent than we already knew they were. 

Markets still favor a 25bp cut in September, but the odds of a 50bp cut shot up 9.5% to just below 40% on yesterday’s release.

Can’t wait to see what Powell says about this tomorrow.

The Big Question: We already knew the labor market was weakening, so does this really change things that much? How can we improve the accuracy of monthly employment counts going forward?

Banana Brain Teaser

Previous

A certain company that sells only cars and trucks reported that revenues from car sales in 1997 were down 11% from 1996, and revenues from truck sales in 1997 were up by 7% from 1996. If total revenues from car sales and truck sales in 1997 were up 1% from 1996, what is the ratio of revenue from car sales in 1996 to review from truck sales in 1996?

Answer: 1:2

Today

A garden center sells a certain grass seed in 5-pound bags at $13.85 per bag, 10-pound bags at $20.43 per bag, and 25-pound bags at $32.25 per bag. If a customer is to buy at least 65 pounds of the grass seed but no more than 80 pounds, what is the least possible cost of the grass seed that the customer will buy?

Send your guesses to [email protected]

❝

Experience is making mistakes and learning from them.

Bill Ackman

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Happy Investing,
David, Vyom, Ankit & Patrick